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Africa tax in brief -September 2016

Ethiopia: Treaty and amending protocol with the Netherlands enter into force

The Ethiopia-Netherlands Income Tax Treaty, 2012 and the exchange of notes, signed on 10 August 2012, entered into force on 1 September 2016, and the amending protocol to the treaty, signed on 18 August 2014, will enter into force on 30 September 2016. The exchange of notes generally applies from 1 September 2016.

The treaty and the amending protocol generally apply from 1 January 2017 for the Netherlands, Bonaire, St. Eustatius and Saba and from 8 July 2017 for Ethiopia. Only once Ethiopia is capable of fulfilling the obligations of article 26 of the treaty on assistance in tax collections will this article apply, after which Ethiopia would need to inform the Netherlands through diplomatic channels.

Ethiopia: Treaty with Ireland enters into force

The Ethiopia-Ireland Income Tax Treaty, 2014 entered into force on 12 August 2016. The treaty generally applies from 1 January 2017 for Ireland and from 8 July 2017 for Ethiopia.

Ethiopia: Income Tax Proclamation 2016

Parliament approved the Income Tax Proclamation 2016 (“ITP 2016”) (equivalent to an act of parliament) on 26 July 2016. Key features of the ITP 2016 include:

a definition of “permanent establishment” as a fixed place of business through which the business of a person is wholly or partly carried on, including a building or a construction, assembly, installation project, or supervisory activity connected with such a site or project when the site, project, or activities continue for more than 90 days

a thin capitalisation rule in terms of which a foreign-controlled resident company, other than a financial institution, having an average debt to average equity ratio in excess of 2 to 1 for a tax year, shall be disallowed a deduction for the interest paid by the company during that year

a treaty override rule which stipulates that, generally, if there is any conflict between the terms of a tax treaty having legal effect in Ethiopia and ITP 2016, the tax treaty will prevail over the provisions of ITP 2016

Parliament also adopted the Tax Administration Proclamation legislation, which is effective from 8 July 2016 and is aimed at consolidating the administration of tax laws and enhancing good governance in tax administration.

A Tax Appeal Commission, accountable to the Prime Minister, has been established to hear tax appeals against appealable decisions.

Ghana: Guidance on taxation of casual labour issued

On 19 August 2016, the Ministry of Finance issued a press release on the reduction in the applicable personal income tax (“PIT”) rate for the taxation of income from casual labour from the marginal rate of 15% to 5%.

It is clarified that:

income from casual labour refers to the wages earned by casual and temporary employees of oil and gas, mining and other companies

casual and temporary workers will no longer be subject to PIT at graduated rates (ie 7.5% to 15%), but employers will withhold PIT at a flat rate of 5% from the wages of such employees

Ghana: Export and re-export of petroleum products guidelines issued

On 5 September 2016, the Commissioner-General of the Ghana Revenue Authority (“GRA”) issued guidelines to be adhered to in the exportation and re-exportation of petroleum products from Ghana with effect from 1 September 2016. An exporter is required to:

obtain an export licence from the National Petroleum Authority

register with the GRA as a self-declarant for customs documentation

obtain a removal bond from an insurance company in accordance with the application procedures

complete all other customs and export processes contained in the guidelines

Mauritius: Protocol to treaty with India enters into force

The amending protocol to the India-Mauritius Income Tax Treaty, 1982, signed on 10 May 2016, entered into force on 19 July 2016. The majority of the protocol articles apply from 1 April 2017 in India and from 1 July 2017 in Mauritius, with the exchange of information and assistance in collection of taxes articles applying in both countries from 19 July 2016.

Mozambique: Amending Budget Bill 2016 adopted by National Assembly

The National Assembly adopted the Amending Budget Bill, 2016 as presented by the Minister of Economy and Finance on 25 July 2015.

The Federal Inland Revenue Service (“FIRS”) recently introduced a restriction to the withholding tax (“WHT”) credit notes that taxpayers can use to settle their Companies Income Tax (“CIT”) liability to credit notes relating to the basis period for the relevant tax year. A company would, for example, only be able to utilise WHT credit notes relating to its 2015 financial year to settle its 2016 CIT liability, and not any of the WHT credits brought forward from prior years.

According to the FIRS, transfer of WHT credit notes from one tax year to another will, going forward, be treated as tax refund under section 23 of the FIRS (Establishment) Act, 2007 and, for this purpose, the FIRS will carry out a special WHT audit on taxpayers that intend to carry forward WHT credits before such credit transfers can be approved.

This FIRS practice is contrary to taxpayers’ statutory right to elect whether they want a cash refund or apply their WHT credit notes “for the purpose of collection against the tax charged on such company by an assessment” or “to set off against future taxes” as provided by section 81 of the CIT Act.

It is expected that the FIRS may reverse this practice on receiving representations from taxpayers.

Nigeria: Public Notice on tax clearance certificates issued

The FIRS recently issued a Public Notice with guidance regarding applications for tax clearance certificates (“TCCs”) by taxpayers.

In terms of the notice, the FIRS is obligated to issue a TCC to qualifying taxpayers no later than two weeks from the date of application. Applicants for a TCC must be registered with a valid tax identification number and must have filed necessary returns to date, including CIT and value-added tax. The TCC issued by the FIRS confirms to the holder that all tax liabilities established either by self-assessment or government assessment up to the immediate past year has been settled by the taxpayer.

If a TCC application is not issued within two weeks of the application, the taxpayer should contact the Director of the Efficiency Unit of the FIRS and furnish the Efficiency Unit with information relating to the past three years on status and amount of all the relevant taxes, and the nature of assessments that gave rise to the liabilities (ie self-assessment, audit assessment or debt management office assessment).

Nigeria: Review of national tax policy – call for memoranda

On 10 August 2016, the Ministry of Finance announced that the process for the review of the National Tax Policy Document had commenced and invited stakeholders to submit memoranda on key policy considerations.

Rwanda: Treaty with Jersey enters into force

On 27 June 2016, the Jersey-Rwanda Income Tax Treaty (2015) entered into force and generally applies from 1 January 2017.

Senegal: Treaty with United Kingdom enters into force

On 30 March 2016, the Senegal-United Kingdom Income (“UK”) Tax Treaty (2015) entered into force. The treaty generally applies from 1 January 2017 in Senegal and April 2016 in the UK.

The Mutual Agreement Procedure, Exchange of Information and Assistance in the Collection of Taxes articles apply in both countries from 30 March 2016.

Tanzania: Taxpayers to verify information with the tax authority

As part of the implementation of a new database, the Tanzania Revenue Authority (“TRA”) is requiring all registered taxpayers to verify their information with the authority from 15 August 2016 to 15 October 2016, by visiting the TRA office which initially issued its Taxpayers Identification Number (“TIN”)

Once the verification process is completed, a new TIN certificate shall be issued. The TINs of taxpayers whose information has not been confirmed by 15 October 2016, shall be deleted from the TRA database.

On 1 September 2016, the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, as amended by the 2010 protocol, entered into force in respect of Uganda. The convention and the amending protocol generally apply from 1 January 2017.

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